Illustration: Lu Ting/GT

China's economy expanded by 7.7 percent in 2013, according to official data released Monday, the slowest growth pace in 14 years but one that many consider stable and healthy nonetheless. Still though, the rate exceeded the government's 7.5 percent target, which had been set with a view toward giving the economy wiggle room on much needed restructuring.

Over recent years, slavish devotion to growth at the local level has come at a tremendous price. Serious government debt levels, industrial overcapacity, official corruption and a deteriorating natural environment - these are all byproducts of local authorities' obsession with ever higher GDP results.

The central government has wisely acknowledged that growth speed must be sacrificed in order to optimize the country's economic structure. Indeed, this realization is already starting to bear fruit. For instance, recent figures from the National Bureau of Statistics show that the tertiary sector accounted for 46.1 percent of China's GDP in 2013, surpassing the secondary sector's contribution for the first time on record.

Clearly the wheels of change are in motion, but we should not let optimism blind us to the enormity of the challenges that still lay ahead.

It bears noting that the real estate and financial industries both belong to the tertiary sector. Strong profit growth within the property industry is largely the result of an unbalanced market, where prices continue to surge well beyond the reach of the average buyer. Despite central government curbs intended to bridle run-away growth, double-digit price jumps are still common in first-tier cities like Beijing and Shanghai.

The financial industry has more than its share of troubles as well. In June, banks and equity markets fell into disarray after the central bank temporarily turned off the liquidity tap. According to reports, officials maintained that market liquidity was ample and the spike in money rates witnessed at that time stemmed from excessive speculative trading and shadow financing activity.

Today, financial regulators are still trying to dampen overuse of off-balance-sheet products. Meanwhile, despite repeated central government exhortations urging banks to offer more credit support to the real economy, money continues to flow into speculative virtual sectors.

On the one hand, recent moves to open the country's booming financial industry have unleashed a groundswell of entrepreneurial activity aimed at individual savers and small-business borrowers, two groups which have historically not been well-served by China's big lenders. For example, Alibaba's Yu'ebao has managed to become the country's largest monetary fund since its launch in June, picking up 49 million users, who had contributed 250 billion yuan ($41 billion) as of January 15.

On the other hand though, the pressure on real enterprises is intensifying amid rising labor and logistics costs, an appreciating renminbi and worrying signs of sluggishness in the global economy. In other words, China's real economy needs all the help it can get.

Under these conditions, I'm concerned as well about the future of China's industrial development, particularly the dangers it faces of an industrial "hollowing out." Not that long ago, economic growth in China was largely based on mining, manufacturing, power generation and other extractive and resource-intensive industries. As China's economy diversifies, allowing agriculture and services to account for a larger share of growth, the question remains: Will traditional heavy industries succeed in realizing long-overdue upgrades? Meanwhile, will more real industries simply reinvent themselves as financial service companies to tap speculative growth in the virtual sector?

Following the central government's recent commitment to giving the market more sway over resource allocation, it's time for Chinese enterprises - both privately held and State-owned - to leverage their creative spirit in the interest of producing a more prosperous society.

There are several elements which can help move this process forward. Modern corporate management systems and stronger legal institutions, for starters, are necessary to protect intellectual property and allow enterprises to develop in a healthy way.

A transparent and fair market is also vital so that all enterprises can compete on an equal footing. This will bolster entrepreneurial zeal and give people with fresh ideas the confidence they need to start their own businesses.

Authorities should also work to balance the relationship between the real economy and the financial sector. The Chinese government is still facing challenges to support the development of the real economy and officials must be mindful of the potential for industrial hollowing.

If the Chinese economy can efficiently follow the guidelines set down during the Third Plenary Session of the 18th Communist Party of China Central Committee, economic growth will remain steady.

The article was?compiled?by?Global Times?reporter?Yu Xi based on an interview with Sun Lijian, deputy director of the School of Economics at Fudan University. bizopinion@globaltimes.com.cn